1/10 POLITICAL ECONOMY OF INTERNATIONAL OIL Trade Structure and Growth SAMUEL A SARKODIE In Daniel Lederman and William F. Maloney’s Natural Resources: Neither Curse nor Destiny. By: Samuel ASUMADU-SARKODIE

2/10 POLITICAL ECONOMY OF INTERNATIONAL OIL Outline Introduction Trade Variables and Growth Natural Resource Abundance Export Concentration Intra-Industry Trade Critique Conclusion SAMUEL A SARKODIE Outline

3/10 POLITICAL ECONOMY OF INTERNATIONAL OIL Introduction There are numerous literature that has being studied to ascertain the relationship between the impact of trade openness or magnitude of trade flows on income levels and on the rate of economic growth. It is thus necessary to investigate the impact of trade structure significantly natural resource specialization, export concentration, and intra-industry trade on growth. This is what Daniel Lederman et al, seems to do in Natural Resource: neither curse nor destiny. SAMUEL A SARKODIE Introduction

4/10 POLITICAL ECONOMY OF INTERNATIONAL OIL Trade Variables and Growth Natural Resource Abundance: Adams Smith: Natural Resources are associated with lower accumulation of human and physical capital, lower productivity growth, and lower spillovers. But Martin and Mitra (2001) found out that, total-factor productivity growth is higher in agriculture than in manufacturing in both advance and developing courtiers. Contrary to Adams Smith, Wright et al, (2000) argues that mining is a dynamic and knowledge-intensive industry in U.S. development Dutch disease may result in high level of export concentration, which may lead to higher export price volatility and hence greater macro volatility. SAMUEL A SARKODIE Trade Variables and Growth Introduction

5/10 POLITICAL ECONOMY OF INTERNATIONAL OIL Trade Variables and Growth Natural Resource Abundance: Easterly and Levine (2002) examined how rents arising from resource extraction may lead to institutional failure. Manzano et al, argue that imperfect international capital markets allow countries experiencing commodity price booms to overborrow, by instituting policies that restrict growth hen credit dries up during the inevitable downturn. SAMUEL A SARKODIE Trade Variables and Growth Introduction

6/10 POLITICAL ECONOMY OF INTERNATIONAL OIL Trade Variables and Growth Export Concentration:  Dependence on a single export can leave a country vulnerable to sharp decline in terms of trade which may give rise to a variety of political economy effects that are harmful to growth.  However, specialization in a particular trade is associated with scale economies and hence, higher productivity. SAMUEL A SARKODIE Trade Variables and Growth Introduction

7/10 POLITICAL ECONOMY OF INTERNATIONAL OIL Trade Variables and Growth Intra-Industry Trade:  With Grubel-Lloyd (1975) index of intra-industry trade, Daniel Lederman argues that, the scale of economies arising from intra-industry trade are thought to lead to more rapid productivity gain, hence faster growth. SAMUEL A SARKODIE Trade Variables and Growth Introduction

8/10 POLITICAL ECONOMY OF INTERNATIONAL OIL Estimation and Results Findings from Lederman’s statistical estimation suggests that, trade variable related to natural resource abundance, export concentration, and intra-industry trade affect growth with is in contrast with already existing conventional wisdom in literature. SAMUEL A SARKODIE Trade Variables and Growth Introduction

9/10 POLITICAL ECONOMY OF INTERNATIONAL OIL Critique Intra-industry trade shows a positive impacts on growth as predicted by Lederman, but I believe it is statistically insignificant since it leaves some doubt which other factors (increased productivity or diversified Intra-Industry trade) accelerate the action. SAMUEL A SARKODIE Trade Variables and Growth Introduction Critique

10/10 POLITICAL ECONOMY OF INTERNATIONAL OIL Conclusion As a result of Lederman’s estimated technique, it is clear without doubt that, there is no evidence of negative impact of natural resource abundance on growth. In other words, there is no resource curse. SAMUEL A SARKODIE Trade Variables and Growth Introduction Critique Conclusion THANK YOU!